Presented to 6th International Conference on Corporate Governance and Board Leadership Paper, Henley Management College, UK, 6−8 October 2003
19 Pages Posted: 20 Sep 2003
Date Written: August 2003
This paper identifies some policy options for encouraging widely dispersed shareholders and/or their fiduciary agents to become more effective in controlling corporations. Even though institutional shareholders have a fiduciary responsibility to exercise their ownership rights to discipline corporations, many are reluctant to do so for various reasons. The paper puts forward three ways to invigorate the voice of all shareholders to control corporations that could be introduced by regulation rather than by legislation. Complementary approaches are proposed based on tax incentives for corporations to distribute some or all of their operating cash flows to make them dependent upon shareholder re-investment to sustain and develop their operations. This would force shareholders to continuously re-assess if they would vote with their chequebooks to support their portfolio companies with new share issues when many new alternative investment opportunities would be created. Two of the cash dependency approaches depend upon adopting a more neutral tax system while the third is based on tax concessions for corporations that meet conditions that introduce compelling benefits of increasing economic efficiency and equity while enriching democracy.
Note: This paper has been accepted for presentation at the 6th International Conference on Corporate Governance and Board Leadership, Henley Management College, UK, 6-8 October 2003.
Keywords: Boards, Conflicts, Corporate constitutions, Directors, Governance, Regulatory conditions, Power, Voting
JEL Classification: D72, D74, D83, G34, G38, K23
Suggested Citation: Suggested Citation